SMEs are the driving force behind Nigeria’s economy. They account for about 96% of businesses and 84% of employment in the country. However, limited access to credit continues to stifle the growth of SMEs and limit their contribution to the country’s GDP. Payhippo was designed to provide SMEs in Nigeria with credit facilities since it was founded in August 2019.
PayHippo is an AI-Driven lending platform that makes it easier to provide finance to small and medium-sized businesses. It was co-founded by Chioma Ruky Okotcha, Uche Nnadi, and Zach Bijesse.PayHippo helps SMEs access and spend lender capital effectively and efficiently. Payhippo’s goal is to give African small businesses access to finance while at the same time helping them to build their credit history. During their first full year of operation, the PayHippo co-founders leveraged their domain expertise and funding experience to beat their 2020 goal by 50%. The startup disbursed its first set of loans early in 2020 when the covid-19 lockdown crippled many businesses leading to lay-offs, furloughs, and salary cuts. This inadvertently resulted in more loan defaults but the startup claimed to have had a 97% repayment rate.
Payhippo raised $3 million in a seed round in November 2021. The round was led by angel investors such as Ham Serunjogi and Maijid Moujaled, the co-founders of the African cross-border payments companyChipper Cash; Olugbenga Agboola of the San-Francisco based payments firm, Flutterwave; Bolaji Balogun, the CEO of the investment banking firm, Chapel Hill Denham; and Hakeem Belo-Osagie, the founder of Metis Capital Partners.
This is the largest amount Payhippo has raised to date after receiving $1 million in pre-seed funding earlier in 2021. The company plans to use the fund in sourcing the talent needed to optimize its technology as it increases its effort to extend quick credit to more small and medium-sized enterprises (SMEs) in West Africa. The startup disburses short-term loans in less than three hours, a record that remains unrivalled by conventional banking institutions in the country, which often requires borrowers to meet stringent conditions. These conditions include regular account activity, maintenance of minimum operating balances as well a visit to physical branches, and extensive paperwork.
Payhippo uses data from its customers’ historical records built with them as well, as their banking history to see the actual performance of their businesses. The startup also applies its credit scoring formula that uses different SME data to determine the loan amount to give out.
The loans are disbursed through mobile phones. Payhippo’s average loan is about $1,300, with the minimum loan being about $200. The company says it has so far disbursed about 5,000 loans since inception and is currently making a 25% month-on-month revenue growth. Payhippo is valued at $1 million with a repayment rate of 97%, earning them $64,000 in revenues.
Given the size of Nigeria’s informal sector and MSMEs making up 96% of the country’s businesses, Payhippo wants to continue to leverage the over 37-million-SMEs market in Nigeria, knowing that funding is still a major hurdle for running any form of business in the country and this group happens to be more disadvantaged.
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